Overview of Temporary Suspension of Certain U.S. Sanctions Pursuant to the Initial Understanding Between the P5+1 and Iran

Fact Sheet

Office of the Spokesperson

Washington, DC

January 20, 2014

Current as of January 20, 2014

For informational purposes only

This document is not exhaustive and cannot be relied upon to assess the potential sanctionability under U.S. law of specific activities. This document is explanatory only, does not have the force of law, and does not supplement or modify the Executive Orders (E.O.s), statutes, or regulations relating to Iran. Further, U.S. sanctions on Iran are regularly updated. Where specific questions arise about applicability, scope, impact, or any other aspects of these sanctions, it is the responsibility of individuals or entities seeking guidance to review the relevant statutes, regulations, and E.O.s, and, if appropriate, consult with legal counsel. For additional information on the temporary suspension of certain U.S. sanctions pursuant to the Joint Plan of Action (JPOA), please consult http://www.state.gov/p/nea/rls/220049.htm and http://www.treasury.gov/resource-center/sanctions/Programs/Documents/jpoa_faqs.pdf.

Introduction

On November 24, 2013, the P5+1 (China, France, Germany, Russia, the United States, and the United Kingdom, coordinated by EU High Representative Catherine Ashton) reached an initial understanding with Iran, outlined in a Joint Plan of Action (JPOA), that halts progress on Iran’s nuclear program and rolls it back in key respects. The JPOA includes the first meaningful limits Iran has accepted on its nuclear program in close to a decade. In return for important steps to constrain Iran’s nuclear program, the P5+1 committed to provide Iran with limited, temporary, and targeted sanctions relief for a period of six months, starting on January 20, 2014, and concluding on July 20, 2014 (the “JPOA period”).

The temporary sanctions relief focuses on a limited number of commercial activities and associated services1 for: Iran’s exports of petrochemical products; Iran’s purchase and sale of gold and precious metals; the provision of goods and services to Iran’s automotive sector; and the licensing of safety-of-flight inspections and repairs for Iranian civil aviation. The sanctions relief also pauses efforts to further reduce Iran’s crude oil exports, enabling the current importers of Iranian crude oil – China, Japan, South Korea, India, Turkey, and Taiwan – to maintain purchases at current average levels during the JPOA period. (The purchase of Iranian crude oil by entities in jurisdictions outside of China, Japan, South Korea, India, Turkey, and Taiwan remains sanctionable under U.S. law.) Iran will also gain access, in installments, to $4.2 billion of its restricted revenues now held in overseas accounts. Finally, Iran and the P5+1 have committed to establish a financial channel to facilitate Iran’s import of certain humanitarian goods, the payment of medical expenses incurred by Iranians overseas, payments of Iran’s UN obligations, and up to $400 million toward university tuition for Iranian students studying abroad.

To implement this limited sanctions relief, the U.S. government has executed temporary, partial waivers of certain statutory sanctions and has issued guidance regarding the suspension of sanctions under relevant Executive Orders and regulations. All U.S. sanctions not explicitly waived or suspended on January 20, 2014, remain fully in force, including sanctions on transactions with individuals and entities on the SDN List unless otherwise specified. Furthermore, U.S. persons and foreign entities owned or controlled by U.S. persons (“U.S.-owned or –controlled foreign entities”) continue to be generally prohibited from conducting transactions with Iran, including any transactions of the types permitted pursuant to the JPOA, unless licensed to do so by OFAC. The U.S. government will continue to enforce U.S. sanctions laws and regulations against those who engage in sanctionable activities that are not covered by the suspensions and temporary waivers announced on January 20, 2014.

All suspended sanctions are scheduled to resume on July 20, 2014, unless further action is taken by the P5+1 and Iran and subsequent waivers and guidance are issued by the U.S. government. Companies engaging in activities covered by the temporary sanctions relief described in this fact sheet should expect sanctions to apply to any activities that extend beyond the current end date of the JPOA period, July 20, 2014. The temporary suspension of sanctions applies only to activities that begin and end during the six months starting on January 20, 2014 and concluding on July 20, 2014. The suspension does not apply to any related, otherwise sanctionable conduct, including shipping and insurance activities, undertaken before that period or after that period, even if they are undertaken pursuant to contracts entered into during the six-month JPOA period. For example, deliveries of goods or services after the JPOA period would be sanctionable even if relevant contracts were entered into during the JPOA period.

Temporary Sanctions Relief By Sector

1. Petrochemical Products

The United States is suspending sanctions on transactions for the purchase of petrochemical products2 from Iran by non-U.S. persons3 , provided that the transactions [and any associated services] are initiated and completed entirely within the JPOA period. The U.S. government will not impose sanctions on such transactions and, where needed, has executed waivers of relevant statutory sanctions to allow such transactions to occur, subject to certain conditions. Specifically, such transactions may not involve persons on the SDN List with the exception of Iranian depository institutions identified solely with the “[IRAN]” tag on the SDN List4 (“non-designated Iranian banks”) and the following 14 entities:

Bandar Imam Petrochemical Company

Bou Ali Sina Petrochemical Company

Ghaed Bassir Petrochemical Products Company

Iran Petrochemical Commercial Company

Jam Petrochemical Company

Marjan Petrochemical Company

Mobin Petrochemical Company

National Petrochemical Company

Nouri Petrochemical Company

Pars Petrochemical Company

Sadaf Petrochemical Assaluyeh Company

Shahid Tondgooyan Petrochemical Company

Shazand Petrochemical Company

Tabriz Petrochemical Company

U.S. sanctions are also suspended on the provision of associated services, including insurance, transportation, and financial services, by non-U.S. persons required to facilitate Iranian petrochemical exports provided that any transactions related to these services are initiated and completed entirely within the JPOA period.

Transactions for the purchase of Iranian petrochemical products and associated services with persons on the SDN List – with the exception of the entities listed above – remain subject to sanctions under U.S. law. For example, transactions for the purchase of Iranian petrochemical products that involve designated Iranian banks remain sanctionable under U.S. law, as do petrochemical product transactions involving the Islamic Republic of Iran Shipping Lines (IRISL) or the National Iranian Tanker Company (NITC).

All U.S. sanctions on investment in the Iranian petrochemical sector remain in force, including – but not limited to – the following:

Selling, leasing, or providing support, goods, technology, or services above certain de minimis thresholds that could directly and significantly contribute to the maintenance or expansion of Iran’s domestic production of petrochemical products.

Investments with the SDN petrochemical companies listed above, including selling, leasing, or providing support, goods, technology, or services to those companies that significantly contribute to their production of petrochemical products, remains sanctionable. The only transactions permitted with the SDN companies listed above are for the purchase of petrochemical products.

2. Gold and Other Precious Metals

The United States is suspending sanctions with respect to transactions by non-U.S. persons for the sale, supply, or transfer to or from Iran of gold and other precious metals5, provided that the transactions are initiated and completed entirely within the JPOA period.

U.S. sanctions are also suspended on the provision of associated services, including insurance, transportation, and financial services, by non-U.S. persons in connection with such transactions provided that any transactions related to these services are initiated and completed entirely within the JPOA period.

The sanctions relief does not permit transactions for the sale of precious metals to Iran involving Iranian funds held in restricted overseas accounts (“Restricted Funds”).6

Engaging in transactions for the sale, supply, or transfer to or from Iran of gold and other precious metals with entities on the SDN List remain sanctionable under U.S. law – with the exception of non-designated Iranian banks and Government of Iran entities not designated under any other U.S. sanctions program (i.e., identified solely with the “[IRAN]” tag on the SDN List).

3. Automotive Sector

The United States is suspending sanctions on transactions by non-U.S. persons for the sale, supply, or transfer to Iran of significant goods or services used in connection with the Iranian automotive sector, including the sale of complete knock-down kits (CKDs), provided that the transactions are initiated and completed entirely within the JPOA period.

U.S. sanctions are also suspended for the provision of associated services, including insurance, transportation, and financial services, and warranty and maintenance services by non-U.S. persons in connection with such transactions, provided that any transactions related to these services are initiated and completed entirely within the JPOA period.

U.S. sanctions relief with respect to Iran’s automotive sector does not extend to any transactions with persons on the SDN List, except non-designated Iranian banks.

As under the other elements of the sanctions relief, transactions related to Iran’s automotive sector that involve designated Iranian banks remain sanctionable under U.S. law.

4. Civil Aviation

The United States is adopting a licensing policy to permit the supply and installation of spare parts necessary for the safety of flight of Iranian civil aviation, for safety-related inspections and repairs in Iran, and for associated services, provided that OFAC has issued any required licenses and the transactions are initiated and completed entirely within the JPOA period. Interested parties should reference OFAC’s new Statement of Licensing Policy on Activities Related to the Safety of Iran’s Civil Aviation Industry (SLP).7

U.S. sanctions have also been suspended for activity by non-U.S. persons to the extent necessary to allow the type of activity covered by the SLP, including associated services such as insurance and transportation. Such transactions must be initiated and completed entirely within the JPOA period and may not involve persons on the SDN List other than Iran Air or non-designated Iranian banks.

This sanctions relief applies to Iranian airlines that are not on the SDN List and to Iran Air. Providing spare parts for Iranian airlines on the SDN list, other than Iran Air, remains sanctionable.

U.S. persons, U.S.-owned or –controlled foreign entities, and persons involved in the export of U.S.-origin goods must apply for and receive licenses from OFAC before providing such goods or services.

Any other transactions with Iran Air for activities beyond those outlined above, such as the provision of new aircraft or refined petroleum products, remain sanctionable under U.S. law. All significant transactions with Iranian airlines on the SDN List other than Iran Air, including the provision of spare parts, new aircraft, or refined petroleum products, remain sanctionable.

China, India, Japan, South Korea, Turkey, and Taiwan will continue to import crude oil from Iran at their current average levels and financial institutions and companies within those jurisdictions will not be exposed to sanctions for those transactions, subject to certain conditions and provided that the transactions are initiated and completed entirely within the JPOA period.

U.S. sanctions are also suspended for the provision of associated insurance and transportation services by non-U.S. persons to the extent necessary to facilitate the purchase of crude oil at current levels to the above jurisdictions, provided that any transactions related to these services are initiated and completed entirely within the JPOA period.

Foreign financial institutions that facilitate these transactions remain subject to the requirements that transactions be limited to bilateral trade and that any revenues owed to Iran from such trade be held in restricted accounts in the purchasing country.

The export of crude oil from Iran to any jurisdiction other than China, India, Japan, Republic of Korea, Turkey, and Taiwan during the period of the JPOA remains sanctionable under U.S. law.

All U.S. sanctions applicable to NIOC and NITC – with the exception of those involving the export of crude oil from Iran to China, India, Japan, Republic of Korea, Turkey, and Taiwan – remain in effect.

Except where explicitly provided for in the sanctions relief pursuant to the JPOA, all other U.S. sanctions on Iran’s energy sector remain fully in force, including – but not limited to – the following:

Investing in the development of Iran’s petroleum resources.

Providing significant goods or services used in connection with the energy sector of Iran.

Providing refined petroleum to Iran.

Engaging in a significant transaction for the purchase, acquisition, sale, transport, or marketing of petroleum products8 from Iran.

6. Repatriation

As part of the JPOA, the P5+1 and Iran have established a process to release in installments over the six-month JPOA period the specified $4.2 billion of restricted Iranian revenue held abroad, and the U.S. government is working with its partners and specific banks to implement this provision. Unless a bank is contacted directly by the U.S. government in writing and notified that an installment release is not sanctionable, the transfer of such restricted funds may expose that bank to U.S. sanctions.

7. Humanitarian Transactions

The United States has continuously maintained broad authorizations and exceptions that allow for the sale of food, agricultural commodities, medicine, and medical devices to Iran. These sales by non-U.S. persons generally are not sanctionable under U.S. law, and the financing or facilitation of such sales by non-U.S. persons likewise does not trigger sanctions, so long as the transaction does not involve certain U.S.-designated persons (such as Iran’s Islamic Revolutionary Guard Corps or a designated Iranian bank) or proscribed conduct. The United States likewise has issued numerous general and specific licenses to allow U.S. persons to engage in humanitarian trade with Iran.

To further support humanitarian trade with Iran, the P5+1 and Iran are establishing a mechanism to further facilitate the purchase of, and payment for, the export of food, agricultural commodities, medicine, and medical devices to Iran. This mechanism could also be used to facilitate Iran’s payments of UN obligations, payments for medical expenses incurred abroad by Iranians, and payments of an agreed amount of governmental tuition assistance for Iranian students studying abroad. Banks whose involvement is sought in hosting this mechanism will be contacted directly by the U.S. government and provided with specific guidance.

Please note that transactions for the export of food, agricultural commodities, medicine, and medical devices to Iran are not required to be processed through this new mechanism.

Footnotes:

1. The term “associated services” means any necessary service – including any insurance, transportation or financial service – ordinarily incident to the underlying activity covered by the JPOA. Unless otherwise noted, such services may not involve persons identified on the Specially Designated Nationals and Blocked Persons List (SDN List) administered by the Department of the Treasury’s Office of Foreign Assets Control (OFAC).

The term “petrochemical products” does not include finished products derived from these substances, such as pipes, plastic bags, tires, and solvents; it also does not include bitumen, condensates, and other substances considered “petroleum products” under E.O. 13622.

3. For purposes of this Fact Sheet, the term “non-U.S. person” means non-U.S. persons not otherwise subject to the Iranian Transactions and Sanctions Regulations (ITSR), 31 C.F.R. part 560.

4. This category effectively excludes, at minimum, any Iranian depository institutions that are designated in connection with Iran’s weapons of mass destruction (WMD) or WMD delivery systems, in support of international terrorism, or human rights abuses (“designated Iranian banks”).

5. For purposes of this sanctions relief, “precious metals” include silver (including silver plated with gold or platinum, unwrought or in semi-manufactured forms, or in powder form); gold (including gold plated with platinum, unwrought or in semi-manufactured forms, or in powder form); base metals or silver, clad with gold, not further worked than semi-manufactured; platinum, unwrought or in semi-manufactured forms, or in powder form; iridium; osmium; palladium; rhodium; ruthenium; base metals, silver or gold, clad with platinum, not further worked than semi-manufactured; waste and scrap of precious metal or of metal clad with precious metals, other waste and scrap containing precious metal or precious-metal compounds, of a kind used principally for the recovery of precious metal.

6. U.S. law imposes sanctions on foreign banks that conduct transactions with the Central Bank of Iran or certain other designated Iranian banks, with the exception that banks in countries that have significantly reduced their purchases of crude oil from Iran ?]may conduct such transactions provided that the transactions involve bilateral trade with Iran and any revenues owed to Iran are maintained in a restricted account in the country. The purchase of gold by Iran using funds from such restricted accounts will continue to be subject to sanctions for the duration of the six-month period. For the purpose of this fact sheet, the term “Restricted Funds” refers to: (i) any existing and future Iranian revenues from bilateral trade with Iran (including trade in petroleum or petroleum products) as described under US law.],,?] and (ii) any Central Bank of Iran (CBI) funds, with certain exceptions for non-petroleum CBI funds held at a foreign country’s central bank.

7. OFAC is issuing a new Statement of Licensing Policy explaining how it intends to license the supply and installation of spare parts for safety of flight for Iranian civil aviation (including transactions with Iran Air) and associated services and safety related inspections and repairs. U.S. persons or their foreign subsidiaries, or persons involved in the export of U.S.-origin goods that are interested in providing such parts and services should review the Statement of Licensing Policy to determine if their contemplated transaction is consistent with its provisions, and, if so, apply for a specific license from OFAC.

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